 Taxation with information: Impacts of customs data exchange on tax evasion in PakistanChao Fang Economic Systems, 2025, vol. 49, issue 1 Abstract: A key challenge for developing countries is improving border taxes enforcement. This study examines whether the Electronic Data Exchange project between Pakistan and China can reduce tax evasion at the Pakistan border. This data exchange significantly reduced the trade gap in consumer goods between China’s reported exports to Pakistan and Pakistan’s reported imports from China, compared to non-consumer goods. These results are consistent with the weak self-enforcing incentives of value-added tax at the consumer stage. Moreover, the data exchange primarily reduced the trade gap by limiting the underreporting of prices rather than reducing the underreporting of quantities, partly fulfilling the project’s original intention. Further exploratory analysis reveals that the data exchange contributed to a reduction in export prices, indicating that Chinese exporters might have been absorbing a portion of the tax burden. This study suggests that using export declarations to improve tax enforcement might not increase tax revenue, as importers and exporters could alter their behavior strategically. Keywords: Customs data exchange; VAT evasion; Third-party information; International trade; Tax pass-through (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:49:y:2025:i:1:s0939362524000657 DOI: 10.1016/j.ecosys.2024.101243 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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